Mexico Opposition Party to Seek Fuel Price Deregulation

A Mexican opposition party that was key to passing the country’s energy overhaul last year will seek to have the market, not the government, set gasoline prices, said a member of the party on the Senate energy committee.

The National Action Party, or PAN, wants to deregulate prices as competition improves in the industry because of the new law, Senator Jorge Luis Lavalle said today in a telephone interview. Government involvement served its purpose by gradually removing subsidies to fuel costs, which are at market price, allowing the practice to eventually end, Lavalle said.

The push comes after Mexico’s ruling PRI and PAN parties broke a 75-year state monopoly on oil and gas drilling in December and as Congress is poised to discuss secondary legislation to implement the law. In January, Mexico started this year’s monthly 9-centavo-per-liter increases in unleaded gasoline as it reduces subsidies to curb consumption and keep government spending in check.

“The gradual reduction in subsidies that gasoline prices have had for many years now has accomplished its goal,” Lavalle said. “This has to be a strategy not only of deregulation of prices, but eventually we have to see competitiveness.”

A liter of unleaded gasoline in Mexico costs 93 cents, according to the Finance Ministry. A liter of unleaded gasoline in the U.S. currently costs 87 cents a liter, according to the American Automobile Association daily fuel gauge report.

Mexican oil will be hedged at $81 a barrel this year to protect against budget shortfalls due to crude price volatility, Finance Minister Luis Videgaray said on Nov. 14. Mexico, the third-largest supplier of oil to the U.S., hedged oil revenues at $86 a barrel in 2013.

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